November 22, 2018 / 11:44 AM / 17 days ago

UPDATE 2-Yamal LNG starts Norway ship transfers as production ramps up

(Adds Yamal on train 3 production, analyst, graphic)

By Sabina Zawadzki

LONDON, Nov 22 (Reuters) - A liquefied natural gas (LNG) tanker is transferring a cargo of Russia’s Yamal LNG to another vessel off the tip of northern Norway on Thursday, the first such operation that will help the facility raise production.

The Vladimir Rusanov, an Arc7 ice-breaking LNG tanker, and the lower Arctic-classed Pskov LNG tanker are both anchored off Honningsvag, Norway, according to Refinitiv Eikon data.

“I can confirm there is an ongoing STS (ship-to-ship) operation in the sea area of Sarnesfjord ... south-west of the city of Honningsvag,” Jan Morten Hansen, regional director at the Norwegian Coastal Administration, said.

Novatek, which operates the Yamal facility, has been ramping up production after loading its first cargo last December. But traders have said output was constrained by the availability of Arctic-classed vessels able to operate in the waters there.

Now it looks likely that such ship-to-ship transfers will become a regular occurrence.

The transfers to other LNG carriers free up the Arc7 ice-breaker LNG vessels to return sooner to Yamal to pick up more cargoes. But this will increase demand for conventional LNG ships to pick up the cargoes from Norway.

Hansen said a Norwegian shipping logistics company, Tschudi Arctic Transit AS (TAT), had permits to conduct such operations.

“TAT will conduct regular STS-operations in four positions on Sarnesfjord and Kafjord in North Cape municipality. The permit allows three simultaneous operations in those positions,” Hansen told Reuters in emailed comments.

Novatek said on Thursday its third train, or facility, at Yamal had begun operations. The capacity of the three trains is 16.5 million tonnes a year, making it one of the largest single LNG export plants in the world.

LNG traders and ship brokers have said Yamal’s output has been constrained by the number of Arc7 LNG tankers, some of which are still being built.

The seven Arc7 tankers in operation have thus far been carrying LNG cargoes to Britain, France and the Netherlands and have either unloaded there or transferred the LNG to conventional carriers for onward journeys, sometimes to Asia.

Another eight are at either under construction or slated to start operations soon.

The transfer in Norway shortens the Arc7 tankers’ journeys by about two thousand kilometres, freeing them up to return to Yamal sooner, enabling the facility to raise production.

But the transfers will also squeeze the global LNG tanker market, Jefferies’ shipping analyst Randy Giveans said.

“This will certainly tighten the (LNG tanker) market as more conventional LNG carriers are needed to finish the routes,” he said.

“(And) although the transportation time is only 3-5 days from Norway to Europe, the time under employment will be much greater due to the extended loading time,” he said, adding that some cargoes will go even further to Asia and Latin America.

LNG shipping rates have already soared to record highs due to the increase in LNG production from Yamal and U.S. facilities as well as the longer distances travelled.

Reporting by Sabina Zawadzki; Editing by Emelia Sithole-Matarise and Jane Merriman

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